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- How can small businesses use business funding for raising capital?
Small businesses can use the following fundraising options for their business capital –
- Bootstrapping; using your own funds
- Angel Investing
- Working Capital Loan
- Term Loan
- Equipment and Invoice Loans
- Crowdfunding
- Partners and Venture Capital
- Government Schemes and Bank Loans
- What kind of business funding is available from banks and NBFCs?
Banks and NBFCs offer term loans, working capital loans, equipment or machine loans, invoice factoring and invoice financing, merchant cash advance, line of credits and bank guarantees.
- What are some ways to raise capital for my business without going for a loan?
If you don’t have the eligibility for a loan but have a solid business plan, you can try the following avenues to raise funding for your business:
- Bootstrapping; using your own funds
- Angel Investing
- Cloud Funding and Crowdfunding
- Partners and Venture Capital (VC)
- Government Schemes and Bank Loans
- What is Bootstrapping?
Bootstrapping is a method through which an entrepreneur establishes a self-sustaining business, markets it, and expands it with very few resources or money from his own pocket. It does not require the help of venture capital firms or the major angel fundings too
- What are the sources for bootstrapping funds for my business?
Investing your own money or getting a personal loan in your own name and using it for business are some common bootstrapping methods for business funding. Your own funds can come from your savings and assets. Loans can be in the form of personal loans, credit card debt, top-up loans and more.
- What is Angel Funding?
Angel funding, often known as angel investment, is a type of equity financing in which an investor provides capital in exchange for a share of the company's ownership.
- What are the pros and cons of angel funding?
The main benefit is that angel investment finance is far less risky than loan financing. Because most angel investors understand business and have a long-term view, you won't have to repay your investment if your business fails.
As a business owner, though, you will not have entire authority over your company. Your angel investor will have a say in how the company is operated and will be paid a percentage of the earnings if the company is sold. With debt financing, the lending institution has no control over your company's operations and receives no profit share.
- How does crowdfunding work?
Crowdfunding is the process of raising small amounts of money from a large number of individuals for a particular project, commercial enterprise, or social cause.
It uses a web-based platform to explain your business model and its potential to interested investors to seek their investment.
- How do Venture Capitalists invest in your business?
Venture capital funds are those funds that are managed professionally and invested in high-potential businesses. They frequently invest in a company with their own money and withdraw when the company goes public or is acquired. VCs bring insight, coaching, and serve as a litmus test for where the company is headed, assessing the company's long-term viability and scalability.
- What kind of businesses would benefit from a Venture Capital investment?
A venture capital investment may be ideal for small enterprises that have moved past the startup stage and are already profitable. Fast-growing companies that have a plan in place for exiting can make tens of millions of dollars, which can be utilized to invest, network, and expand their business swiftly.
- What are some popular government schemes and loans that can help you with business funding?
The PMMY Mudra Yojana is by far the most popular scheme to raise funding for a start-up or an established MSME enterprise. There are other schemes like Mahila Udyami Scheme, Udyogini Scheme, Credit Linked Capital Subsidy Scheme (CLCSS), SMILE – to develop the Make In India initiative and the Credit Guarantee Fund Scheme for Micro and Small Enterprises.